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##### Finance Homework Problems Solution

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Question;Q.1.You bought a share of 3 percent preferred stock for $96.67 last year. The market price for your stock is now $98.43What was your total return for last year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Total return %Q2. You?ve observed the following returns on Mary Ann Data Corporation?s stock over the past five years: 10 percent, ?10 percent, 17 percent, 22 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 3.0 percent.What was the average real risk-free rate over this time period? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Average real risk-free rate %What was the average real risk premium? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Average real risk premium %Q3.Consider the following rates of return:Year Large Company US Treasury Bill1 3.99 % 6.65 %2 14.50 4.463 19.39 4.334 ?14.29 7.345 ?31.78 5.446 37.10 6.45________________________________________Calculate the standard deviation of the returns for large-company stocks and T-bills over this period.(Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))Standard deviationLarge company stocks %T-bills %________________________________________c-1 Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the arithmetic average risk premium over this period? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))Average risk premium %c-2 Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the standard deviation of the risk premium over this period? (Round your answer to 2 decimal places. (e.g., 32.16))Standard deviation %Q4.Returns Year X Y 1 13 % 18 % 2 27 28 3 ? 20 ? 25 4 8 10 5 10 19 ________________________________________Using the returns shown above, calculate the average returns, the variances, and the standard deviations for X and Y (Do not round intermediate calculations and round your final percentage answer to 2 decimal places. (e.g., 32.16) and variances to 5 decimal places. (e.g., 32.16161))X YAverage returns % %Variances Standard deviations % %

Paper#50027 | Written in 18-Jul-2015

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